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Democrats take aim at bid to privatize Pennsylvania lottery

By MARC LEVY Associated Press

Updated:
12/05/2012 12:12:45 AM EST

HARRISBURG, Pa.—Democratic lawmakers are taking aim at GOP Gov. Tom Corbett administration's move to privatize the Pennsylvania Lottery's management, saying it is shrouded in secrecy and will result in a corporate giveaway that diverts hundreds of millions of dollars from the state's services for the elderly.

In a Friday letter, Senate Minority Leader Jay Costa, D-Allegheny, asked Corbett for a slew of documents, including the proposed management agreement between the state and Britain-based Camelot Global Services, an unredacted copy of Camelot's bid and a full explanation of the scope of expanded lottery gambling being considered.

"A decision as important as handing over an extremely well-run, efficient, and successful lottery to a foreign company should not be made behind closed doors, by a limited amount of people and without public input," Costa wrote.

A spokeswoman for the state Department of Revenue, which runs the lottery, insisted Tuesday that the drive to award a private management contract had been "a fair and deliberative process." The agency would share as much as it could with Costa, such as the management agreement, but some information would remain confidential, spokeswoman Elizabeth Brassell said.

Corbett has said he is exploring privatization of the lottery management to see if a private company can help ensure that lottery profits keep pace with demand for programs that benefit the state's growing elderly population.

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Only a couple of states have given private companies the right to manage their lotteries, and a substantial expansion of lottery gambling to keno and online games is expected to be part of Corbett's plan to produce more lottery revenue.

One of the nation's largest state lotteries, the 40-year-old Pennsylvania Lottery had $3.5 billion in sales in its last fiscal year. Of that, almost $1.1 billion was profit benefiting programs that the Corbett administration says directly support nearly 1 million elderly Pennsylvanians.

Corbett administration officials expect to decide by Dec. 31 on whether to award the contract to Camelot, which runs the national lottery in the United Kingdom. It is the lone bidder after two other companies, which the Corbett administration will not identify, dropped out.

Camelot is pledging to produce more than $34 billion in profits over 20 years if it wins the contract, according to figures released by the Department of Revenue. That amounts to an annual lottery profit increase of about 3 to 4 percent a year, in line with the lottery's performance over the past decade. Last year, lottery profits rose by more than 10 percent and are on track to exceed that number in this fiscal year, as well.

In a separate statement Monday, House Democratic leaders said the proposed agreement would ensure that Camelot stands to reap hundreds of millions of dollars in profits that otherwise would go to transit programs, rent and property tax subsidies, prescription drug assistance, senior centers and long-term care services.

"This is nothing short of a massive corporate giveaway," said House Democratic Whip Mike Hanna of Clinton.

What Camelot stands to make depends on the amount by which lottery profits exceed its annual projections, according to the Department of Revenue.

Camelot would be paid incentives for exceeding its profit projections, up to 5 percent of profits, the most allowed under federal law. Its compensation would include its invoiced costs, while less than 0.75 percent of profits would be allowed to cover its indirect, non-invoiced expenses, according to the department.

Last year, Illinois became the first state to have a private company manage its lottery. Indiana's lottery management goes private in February, and New Jersey has been considering such a move.

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